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US Employment Litigation Round-Up for April 2016

Update: On April 21, 2016, San Francisco Mayor Ed Lee signed into law an ordinance that will require employers with 20 or more workers to provide at least six weeks of fully paid leave to parents (mothers, fathers, and same-sex couples) who bear or adopt a child. Under existing California law, workers are entitled to 55 percent of their pay for up to six weeks through employee-financed public disability insurance. San Francisco’s new ordinance will require employers to cover the remaining 45 percent. The ordinance also fills a gap in current California law by making it unlawful for an employer to terminate an employee after taking parental leave. Employers with more than 50 workers have until January 1, 2017, to comply, while smaller employers have until June 1, 2017 (35-50 workers), and January 1, 2018 (20-34 workers).

Impact: San Francisco’s new ordinance reflects a growing trend of states and municipalities requiring paid time off for parental leave and sickness. Earlier in April, the state of New York enacted legislation guaranteeing employees up to 12 weeks (up to 67 percent of their salary) of paid family leave to care for a new child or seriously ill family member. New Jersey and Rhode Island also have laws requiring partially paid family leave. In addition, many companies, especially those in the technology sector, have implemented generous parental leave programs in order to attract employees. For example, news outlets have reported that Facebook offers four months of fully paid parental leave, eBay and Spotify offer six months, and Netflix offers unlimited parental leave for a full year. Given the current legislative and private sector trend, employers should consider reviewing their leave policies to ensure that they keep current with applicable state or local laws and to determine whether they are competitive in the marketplace.

Campaign to Increase Minimum Wage Gains Traction As California and New York Raise Statewide Minimum Wage Rates over Time

Over the past few years, momentum has been growing nationwide to raise the minimum wage. In 2014, San Francisco voters passed an ordinance that will raise the minimum wage from $13 to $14 per hour on July 1, 2017, and to $15 per hour by 2018. In 2015, the Los Angeles city council voted to increase the minimum wage in Los Angeles from $9 to $15 per hour by 2020. The minimum wage increase in Los Angeles came on the heels of the 2014 passage of the Los Angeles Hotel Minimum Wage Ordinance, which requires big hotels in Los Angeles to pay an hourly minimum wage of $15.37 per hour to employees by July 2016.

In line with the growing trend, in April 2016 California lawmakers passed legislation to gradually raise the statewide minimum wage to $15 per hour by 2022. Under the new law, California’s minimum wage, currently at $10 per hour, will rise to $10.50 per hour on January 1, 2017, for business with 26 or more employees, and to $11 per hour on January 1, 2018, and will continue to rise one dollar per year until it reaches $15 per hour in 2022. Businesses with 25 or fewer employees will have an extra year to ramp up the pay increases.

On the same day as the California bill’s passage, New York lawmakers announced an agreement to raise the minimum wage to $15 per hour by the end of 2018. For workers in New York City employed by businesses with at least 11 employees, the minimum wage will rise to $11 per hour at the end of 2016, increasing by another $2 per hour each year for two years. The minimum wage for employees at smaller companies will rise to $10.50 per hour by the end of 2016, and then will go up another $1.50 per hour each year for three years. For workers elsewhere in the state, the minimum wage increase will be slower, rising to $12.50 per hour in 2021, and then to $15 per hour on an undetermined schedule.

Last month, Oregon also passed a new minimum wage law enacting a series of minimum-wage increases through 2022. The new Oregon law is the first in the country to mandate higher pay in cities than rural areas, creating three minimum wage tiers for the state. Rural areas will see a wage increase from the current rate of $9.25 to $12.50 per hour by 2022. The minimum wage in the Portland area will increase to $14.75 per hour by 2022, and the rest of the state will use a base wage that will increase to $13.50 per hour by 2022.

Decision: In Kilby v. CVS Pharmacy, Inc., the California Supreme Court interpreted language in the California Industrial Commission Wage Orders requiring that “working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.” In doing so, the Court answered three questions: (1) whether the phrase “nature of the work” refers to “individual tasks performed throughout the workday, or to the entire range of an employee’s duties performed during a given day or shift”; (2) what factors courts should consider when determining whether the nature of the work “reasonably permits” use of a seat and, specifically, whether “an employer’s business judgment, the physical layout of the workplace, and the characteristics of a specific employee” are relevant factors in the analysis; and (3) whether, to prove a violation of the applicable order, a plaintiff must prove that a suitable seat is available when no seat has been provided.

The Court determined that “nature of the work” refers to “an employee’s tasks performed at a given location for which a right to a suitable seat is claimed” and not to all of the tasks the employee performs over the course of a shift. So, if “the tasks being performed at a given location reasonably permit sitting, and provision of a seat would not interfere with performance of any other tasks that may require standing, a seat is called for.” The question of whether the nature of the work “reasonably permits” sitting must be determined objectively based on the totality of the circumstances. “An employer’s business judgment and the physical layout of the workplace are relevant but not dispositive factors, and “the inquiry focuses on the nature of the work, not an individual employee’s characteristics.” Last, the burden is on the employer to prove unavailability of a seat.

Impact: Plaintiffs’ counsel are likely to view the decision as a victory because of the Court’s rejection of the “holistic” consideration of the entire range of an employee’s duties. Some aspects of the decision, however, may be beneficial to employers, including the fact that the Court emphasized looking at all of the relevant circumstances of how work is performed at a work location and the Court’s acceptance of the role of an employer’s business judgment about and the physical configuration of the workplace. Because of the multi-factor approach articulated by the Court, how any particular suitable-seating case will be decided remains to be seen. The decision is therefore likely to encourage the filing of more suitable-seating class and representative actions. Employers would be wise to evaluate whether the job duties that their employees are performing while required to stand reasonably could be performed while seated.

Decision: On March 28, 2016, the California Supreme Court held that the arbitration agreement signed by a former employee of the retail clothing company Forever 21 was not unconscionable. After resigning from Forever 21 in January 2011, Maribel Baltazar sued the company for racial and sexual harassment. An arbitration provision in Baltazar’s employment contract allowed the parties to pursue preliminary injunctive relief. Baltazar argued that the clause was substantively unconscionable for “lack of mutuality” because employers were much more likely than employees to seek preliminary injunctive relief. The trial court agreed with Baltazar, but the court of appeal reversed. Upon review, the California Supreme Court unanimously affirmed the court of appeal’s decision in the employer’s favor. The Supreme Court explained that the injunctive relief provision simply confirms the parties’ undisputed statutory rights under the California Arbitration Act and thus, despite the fact that employers are more likely than employees to seek injunctive relief, that the provision cannot be the basis for a claim of unconsionability. In doing so, the Supreme Court expressly overruled the 2010 court of appeal ruling in Trivedi v. Curexo, which invalidated an employment arbitration provision based on a similar preliminary injunctive relief clause.

Impact: The California Supreme Court’s Baltazar decision forecloses an argument often raised by litigants challenging arbitration provisions. The California Arbitration Act governed the arbitration agreement, so the decision does not address the larger issue of whether the “mutuality test” created by the California Supreme Court in Armendariz v. Foundation Health Psychcare Services Inc. (2000) is viable in light of subsequent US Supreme Court cases – most notably AT&T Mobility v. Concepcion (2011). Thus, while the Baltazar decision effectively forecloses the argument that provisions for seeking preliminary injunctive relief violate the mutuality test, it nevertheless leaves the ultimate issue for another day.

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